GenuineVC David Beisel's Perspective on Digital Change

The Branding Benefits from Pay-Per-Performance

October 26, 2006

Very interesting article in this week’s AdWeek about “advertisers… taking a broader view of search, buying terms they want consumers to associate with their brands, even though the searchers clearly aren’t hunting for their products.”

It cites an example, “Honda has bought thousands of such keywords as part of a new campaign for its CRV. While it continues to buy auto terms as well, the carmaker is acquiring keywords related to its new “Crave” theme, like “chocolate,” “banana splits” and “celebrity gossip,” all designed to bring searchers to a community Web site Honda created for users to collect and share craves.”

This campaign is indeed a salient example of traditional brand advertisers experimenting with online media buys that have traditionally been in the pay-per-performance realm. I believe it gives a nod to the implicit notion that advertisers do receive “branding benefits” from online pay-per-performance campaigns, whether it is intentional (as in this case) or not.

Many online retailers that heavily use affiliate programs have known this fact for years. Surely Amazon.com receives more than just the direct gain from the traffic by having is products and links featured throughout the web on its affiliate sites. I’ve been in more than one conversation recently where someone has argued to me that affiliates (not just Amazon’s, but generally-speaking) are consistently and systematically undercompensating affiliates because they only measure direct sales generated by the traffic for the retailers, not the residual traffic that it generates in stores or the increased branding effect inducing purchases long after the cookie is expired.

In reality, though, branding benefits from pay-per-performance largely depend on the brand doing the advertising itself – I would maintain that this traffic has a greater impact if it is reinforcing and strengthening an existing well known brand (like Honda in the above example) than it does necessarily creating brand awareness for a lesser-known one. I suspect it’s the products’ brands, not the merchandisers’ brands, which will continue to experiment more in this realm, as they are the ones who are losing their pull from disruption in their traditional brand-building outlets.

The difficulty, of course, is the perennial ability to accurately measure the effectiveness of brand advertising. The AdWeek article doesn’t avoid the issue, “While brand-building search campaigns are not held to strict sales metrics, the ability to track results helps quantify their effect.” The article claims 50K visited the site in a month, while a comment on Search Engine Watch from the agency responsible for the campaign claims that the campaign has generated “nearly ½ of a million visits to the crave.honda.com.” As of this morning, however, there are only 348 user-submitted “craves” – the action the site is enticing consumers to take to further engage with the brand. Is that success? Is less than one-hundredth of one percent of people interacting in the intended way good? As pay-per-performance and branding campaigns begin to converge, these are the questions that advertisers wrestle with. Regardless, these advertisers who are on the fringe experimenting with new outlets will reap the benefits from them, whether they are easily quantified or not.

David,You are absolutely right that cpa and search advertising do have significant residual value in terms of branding. But sophisticated advertisers know and can account for that and factor it into their spend. So the real question becomes whether there is liquid competition for that traffic where multiple advertisers are bidding for the same thing. If that competition does exist, like in Google’s adwords, the market ought to account for the added branding value in terms of the prices advertisers are willing to pay. The real inefficiency is in the traditional affiliate ads where the market is not liquid or competitive. There lots of money is getting left on the table.

Keep up the good work, I really enjoy your blog.

Zach

http://www.nooked.com Fergus Burns

Hi David

This is a great post – and something I’m trying to address at the moment with some of our own clients

Talk SoonFergus

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